THE Global System for Mobile Communications Association (GSMA) has called on African governments, including Nigeria, to follow in Kenya's footsteps and lower taxes on mobile phone handsets in order to achieve fast economic growth, saying Kenya's economy has benefited from the same.GSMA, which represents the interests of mobile operators globally said in a new study released on Monday that mobile handset sales in Kenya have soared by 200 per cent following the government's 2009 decision to slash 16 per cent Value Added Tax (VAT) levied on handset sale.'Kenya has shown great foresight in abolishing mobile handset taxes making mobile services more affordable for the wider population, with the growth in uptake contributing significantly to the Kenyan economy,' said Gabriel Solomon, head of Regulatory Policy, GSMA.Solomon said mobile operators will contribute 33 per cent more in tax this year than they did prior to the handset tax slash and will contribute around 8 per cent of Kenya's GDP this year.'We call on all African governments to consider abolishing handset taxes and follow the successful example of Kenya,' he said after releasing the study, which was undertaken by Deloitte for the GSMA as part of a larger global benchmarking study.According to the study, mobile penetration in Kenya has increased from 50 per cent to 70 per cent since the government abolished VAT on handset sales.The study revealed that, in 2011 the mobile communications industry contributed more than 3.9 billion U.S. dollars to the Kenyan economy. Additionally, the research indicates that the mobile communication industry as a whole has employed almost 250,000 people in Kenya in 2011 alone.'The report's findings indicate that consumers, particularly in developing countries, are price sensitive and that tax cuts could boost consumption of mobile services,' Chris Williams, Deloitte Telecoms partner said.Despite the research finding that taxation on the total cost of ownership for a mobile phone in Kenya fell from 25 per cent to 17 per cent over the last five years and the abolition of VAT, mobile taxation in Kenya still remains just above average across sub-Saharan Africa as a 10 per cent excise duty as well as VAT on airtime is still levied.The research also found that a new type of tax is emerging in Africa, the 'Surtax on International Inbound Call Termination (SIIT),' which centrally fixes the prices that operators can charge when terminating international inbound calls.The SIIT distorts price competition, which has a negative impact on business and consumers.The research found that where the SIIT has been imposed, the level of inbound international traffic has fallen and prices of outbound calls have increased due to the reciprocation of higher termination prices by operators in other African countries.The SIIT has had the following impact where it has been applied in Congo Brazzaville, Gabon, Ghana and Senegal.'In Congo Brazzaville, where SIIT has been applied, the price of inbound traffic has risen by 111 per cent and operators report that inbound traffic fell by 36 per cent,' it says, adding that in Gabon prices rose by 82 per cent when the SIIT was imposed in August.
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